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Income Tax (Charge of Higher Rates for 1983–84)

Ways and Means – in the House of Commons at 3:58 pm on 30th June 1983.

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Photo of Mr Peter Rees Mr Peter Rees , Dover 3:58 pm, 30th June 1983

I beg to move, That income tax for the year 1983–84 shall be charged—

  1. (a) in respect of so much of an individual's total income as exceeds £14,600 at such higher rates as are specified in the Table below; and
  2. (b) in respect of so much of the investment income included in an individual's total income as exceeds £7,100 at the additional rate of 15 per cent.

TABLE
Part of excess over £14,600Higher rate
The first £2,60040 per cent.
The next £4,60045 per cent.
The next £7,10050 per cent.
The next £7,10055 per cent.
The remainder60 per cent.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

As the House will see, these motions open the way for the Finance Bill, which the House will debate next week and which is designed largely to restore various clauses which had to be dropped from the earlier Finance Bill because of the imminence of the general election.

Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Shadow Chief Secretary to the Treasury 3:59 pm, 30th June 1983

In welcoming the Chief Secretary to our debate, I must tell him that he is coming on to well-chewed food, as we have discussed these matters at considerable length. I also offer my good wishes to you, Mr. Deputy Speaker.

I happen to hold a minority opinion in the House, although not on the Opposition Benches, that the last Finance Act of the previous Government was the best one that they produced. It was the only good one, mainly because of the part played by my hon. Friends who filled their notable role in its final production. It was the only good one because it raised income tax thresholds for the ordinary man and woman and did not widen the gap between the rich and the poor.

I recall the Government's threats to reintroduce some of the lost clauses of the previous Finance Bill, and we see some of them in regurgitated form in the motions before us. We shall, of course, express ourselves amply and fully in the various stages of the Finance Bill produced as a result of these Ways and Means motions, and that will take place in the next week or so.

At the time of the Budget motions in March, we did not divide the House on the motions that have now been presented to us. The only one on which we intend to vote is the first. This is the most offensive, as it continues the Government's philosophy by giving to those with the highest incomes the greatest tax reliefs. The other matters will appear in greater detail in the Finance Bill and they will be subject to the same examination, scrutiny, debate and opposition as we have always provided for the Government's fiscal proposals.

4 pm

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

As you, Mr. Deputy Speaker, know so well in your high office, on which Liberal Members warmly congratulate you, the motions before us are a key part of the House of Commons' fundamental responsibility for taxation.

Although I and my hon. Friends are quite content to go along with the proposal of the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) to have, as it were, a token vote, it is nevertheless inappropriate that the debate should be greatly foreshortened simply because some hon. Members, though not the 150 new hon. Members, have been over this ground before. I take slight issue with the right hon. Gentleman when he says that we have discussed these matters at great length before, because, although that is literally true of some of us, it is not true of the 150 new Members.

I am sure that Treasury Ministers will not take refuge in the threadbare alibi that all this can be debated satisfactorily in a one-day Second Reading debate. So many matters will be covered in the Finance Bill that it will be impossible for every party now represented in the House to cover the important ground contained in these proposals.

It may be suggested that because Treasury Ministers have simply dragged a dead sheep out of the freezer and brought its form back to the House exactly as it was in March we need not go over the ground again. However, since the middle of March the economy has changed substantially and is in quite different shape. For example, mortgage interest rates have risen substantially, the rate of inflation looks as if it is beginning to rise again, and the balance of trade appears to have deteriorated sharply. We cannot be complacent and take the view that all that was said by some hon. Members in the middle of March covers the ground today.

I should make it plain that, just as they did in March, Liberal Members continue strongly to oppose three of the motions. The first is the raising of all income bands subject to higher taxation by an appalling 14 per cent. —two and a half times the appropriate rate of inflation. Secondly, we continue to oppose strongly the raising of the mortgage threshold on which tax relief is given. Thirdly, we oppose, as we did previously, the sharp reductions in capital transfer tax.

On the raising of mortgage interest relief thresholds, the Prime Minister said that in the big cities of the south-east about one third of new mortgages are for more than £25,000". That was the sole point on which the right hon. Lady based her defence for bringing the proposal back to the House three months after it first appeared.

In reply to the hon. Member for Bolsover (Mr. Skinner), who was as pertinent as ever, the Prime Minister said: The demand for mortgages is so great that the building societies must obtain more savings to meet that demand, which has arisen because Tory Governments give greater opportunities for home ownership".—[Official Report, 22 June 1983; Vol. 44, c. 5–55.] I assent to that proposition entirely, and that is why we object to this move. As the Prime Minister made so crystal clear, if the Government encourage some people to take out larger mortgages, thus adding to the excessive demand, there is bound to be an increase in the interest rate for everyone.

Photo of Mr Dale Campbell-Savours Mr Dale Campbell-Savours , Workington

The hon. Gentleman registers an objection. Does he intend to take it as far as voting against these motions?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I have already explained that I assent to the token vote proposition, because there is no purpose in asking hon. Members to vote on everything —[HON. MEMBERS: "Ah!"]— but we shall take our opposition to the country and make it plain in our vote on Second Reading of the Finance Bill

Photo of David Winnick David Winnick , Walsall North

Will the hon. Gentleman give way on this point?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I shall incur the wrath of the Chair if I give way any further.

How right Sam Brittan was when he said in the Financial Times, on the day after the Budget in March, that this is the type of distortion which does more to raise interest rates than a quite substantial increase in the Budget deficit would do".

Photo of David Winnick David Winnick , Walsall North

Will the hon. Gentleman give way?

Photo of David Winnick David Winnick , Walsall North

I am grateful to the hon. Gentleman, whose argument I am following closely. As he knows, he has expressed the views of Labour Members. During the election campaign, did the Liberal party or did the Liberal leader make clear that objection to raising the tax relief on higher mortgages?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I am surprised at that question. It is precisely 20 years since the Liberal party published its policy on mortgage interest relief, and up and down the land I have been eloquent in commending it ever since.

It follows from the Prime Minister's excellent analysis of the economics of encouraging larger mortgages that, when additional tax relief is given on larger mortgages, the building societies will be in a worse demand-supply position, and that is bound to mean higher interest rates. Thus, the average first-time buyer—and it was the first-time buyer about whom the Prime Minister was so deeply concerned — will gain no benefit whatever from this proposal but will suffer considerable harm as a result of the higher interest rates which he or she will have to pay.

It may already be well known that at present the average mortgage taken out by first-time buyers is reported by the Nationwide Building Society to be about £18,690 and by the Leeds Permanent Building Society, as of last month, to be £16,634. It will be seen from those figures that the means of the average first-time buyer are a long way off even the present threshold of £25,000. Even those in the big cities of the south-east will in the end be no better off, because of the extra interest that they will have to pay.

There are many big cities outside the south-east. As you, Mr. Deputy Speaker, know from your constituency, the aggregate urban population is larger elsewhere in the country than it is in London. I have made some brief inquiries of the daily and 13 evening newspapers in that area, including Liverpool, Leeds, Bradford, Manchester and Sheffield. It is clear that the typical house sought after by the first-time buyer is available on the market. There are perfectly reasonable properties at between £15,000 and £20,000 — miles away from the present maximum figure.

Photo of Mr Jeff Rooker Mr Jeff Rooker , Birmingham, Perry Barr

Did the Liberal party vote against this Ways and Means motion in March?

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

No one voted against this Ways and Means motion in March. We all went along with the civilised view that one or two votes on these motions were sufficient to register our disapproval pending the arrival of the Finance Bill.

One of the features of this largest aggregate of urban population is that, for the first time in many years, that area has returned a substantial number of Conservative Members. I am sure that all of them, being diligent representatives of constituents, will consider carefully whether there is a single first-time home buyer in their constituencies who needs to borrow more than £25,000. All the rest will be put at a serious disadvantage by the effects of this proposal. Certainly, constituencies such as Dewsbury, Pudsey, Batley and Spen and Calder Valley will find that that is the position.

Mortgage tax relief in its present form and context ought to have been allowed to wither on the vine. Why should there be tax relief on adding a room to one's home when there is no tax relief on borrowing money to buy anything else as an adjunct to the quality of life? I ask Treasury Ministers why there is no tax relief on interest of £100 a year—

Photo of Mr Richard Wainwright Mr Richard Wainwright , Colne Valley

I shall not give way — incurred solely to acquire an asset that brings in a taxable income of £200 a year? How can the Treasury Ministers say that they will tax credits but conveniently ignore the essentially linked debits? To pick out one form of expenditure and borrowing on which to give tax relief is unjustifiable and primitive and flies in the face of all business sense. It is a symbol of Victorian superstition about bricks and mortar which the House ought to forget as soon as possible.

Photo of Alan Beith Alan Beith Opposition Whip (Commons) 4:12 pm, 30th June 1983

During the course of the debate, Labour Members showed some zeal for voting against motion No. 3. It was not intimated beforehand by the Labour Front Bench spokesman, who told me that they would be unwilling to vote against this provision for reasons which they might like to explain. [Interruption.] Therefore, we can use the procedures of the House to give those hon. Members the opportunity to vote with us against the motion.

Photo of Mr Robert Sheldon Mr Robert Sheldon Chair, Public Accounts Committee, Shadow Chief Secretary to the Treasury 4:13 pm, 30th June 1983

Perhaps the hon. Member for Berwick-upon-Tweed (Mr. Beith) did not hear what I said. I made it clear that no one voted against the Ways and Means motion on the Budget. That does not preclude us from any decision on any of these motions or any other clauses of the Finance Bill as they come up and are debated in the House. That is the position and always was.

Question put:

The House divided: Ayes 228, Noes 115.

Division No. 4][4.15 pm
AYES
Aitken, JonathanBeaumont-Dark, Anthony
Alexander, RichardBellingham, Henry
Alison, Rt Hon MichaelBenyon, William
Amess, DavidBerry, Hon Anthony
Arnold, TomBest, Keith
Atkins, Rt Hon H. (S'thorne)Biggs-Davison, Sir John
Atkins, Robert (South Ribble)Blackburn, John
Atkinson, David (B'm'th E)Blaker, Rt Hon Peter
Baker, Kenneth (Mole Valley)Body, Richard
Baker, Nicholas (Dorset N)Bottomley, Peter
Baldry, AnthonyBowden, Gerald (Dulwich)
Banks, Robert (Harrogate)Braine, Sir Bernard
Batiste, SpencerBright, Graham
Brinton, TimJones, Robert (Herts W)
Brown, M. (Brigg & Cl'thpes)Kershaw, Sir Anthony
Bruinvels, PeterKey, Robert
Bryan, Sir PaulKing, Roger (B'ham, N'field)
Buchanan-Smith, Rt Hon A.Knight, Gregory (Derby N)
Buck, Sir AntonyKnight, Mrs. Jill (Edgbaston)
Budgen, NickKnowles, Michael
Burt, AlistairLang, Ian
Butterfill, JohnLatham, Michael
Carlisle, Kenneth (Lincoln)Lawler, Geoffrey
Carttiss, MichaelLawson, Rt Hon Nigel
Chope, ChristopherLee, John (Pendle)
Clark, Michael (Rochford)Lennox-Boyd, Hon Mark
Clegg, Sir WalterLester, Jim
Cockeram, EricLewis, Sir Kenneth (Stamf'd)
Colvin, MichaelLilley, Peter
Conway, DerekLord, Michael
Coombs, SimonLuce, Richard
Cope, JohnLyell, Nicholas
Couchman, JamesMacKay, Andrew (Berkshire)
Cranbourne, ViscountMajor, John
Crouch, DavidMalins, Humfrey
Currie, Mrs. EdwinaMaples, John
Dicks, T.Marland, Paul
Dorrell, StephenMarshall, Michael (Arundel)
Douglas-Hamilton, Lord J.Mates, Michael
du Cann, Rt Hon EdwardMather, Carol
Dykes, HughMawhinney, Dr Brian
Evennett, DavidMaxwell-Hyslop, Robin
Eyre, ReginaldMayhew, Sir Patrick
Fallon, MichaelMellor, David
Favell, AnthonyMeyer, Sir Anthony
Fenner, Mrs. PeggyMiller, Hal (B'grove)
Finsberg, GeoffreyMills, Iain (Meriden)
Fookes, Miss JanetMills, Sir Peter (Devon, West)
Forsyth, Michael (Stirling)Moate, Roger
Fox, MarcusMontgomery, Fergus
Franks, CecilMoore, John
Fraser, Sir HughMorris, M. (N'hampton, S.)
Freeman, RogerMorrison, Hon P. (Chester)
Gale, RogerMoynihan, Hon C.
Galley, RoyMurphy, Christopher
Gardiner, George (Reigate)Neale, Gerrard
Garel-Jones, TristanNeedham, Richard
Gilmour, Rt Hon Sir IanNicholls, Patrick
Glyn, Dr. AlanNorris, Steven
Goodlad, AlastairOnslow, Cranley
Greenway, HarryOttaway, Richard
Gregory, ConalPage, Richard (Herts, SW)
Griffiths, Peter (Portsm'th N)Pawsey, James
Ground, PatrickPeacock, Mrs Elizabeth
Gummer, John SelwynPercival, Rt Hon Sir Ian
Hamilton, Hon A. (Epsom)Porter, Barry
Hamilton, Neil (Tatton)Powell, William (Corby)
Hanley, JeremyPowley, John
Hannam, JohnPrentice, Rt Hon Reg
Hargreaves, KennethPrice, Sir David
Harvey, RobertProctor, K. Harvey
Hawkins, C. (High Peak)Raffan, Keith
Hawksley, WarrenRathbone, Tim
Hayes, J.Rees, Rt Hon Peter (Dover)
Hayhoe, BarneyRhodes James, Robert
Hayward, RobertRhys Williams, Sir Brandon
Heathcoat-Amery, DavidRidley, Rt Hon Nicholas
Heddle, JohnRobinson, Mark (N'port W)
Hickmet, RichardRoe, Mrs Marion
Higgins, Rt Hon Terence L.Rost, Peter
Hirst, MichaelRowe, Andrew
Hogg, Hon Douglas (Gr'th'm)Ryder, Richard
Hordern, PeterSackville, Hon Thomas
Howard, MichaelSainsbury, Hon Timothy
Howarth, Alan (Stratf'd-on-A)Sayeed, Jonathan
Howarth, Gerald (Cannock)Shaw, Sir Michael (Scarb')
Howell, Rt Hon D. (G'ldford)Shelton, William (Streatham)
Hubbard-Miles, PeterShepherd, Richard (Aldridge)
Hunt, John (Ravensbourne)Silvester, Fred
Hunter, AndrewSims, Roger
Hurd, Rt Hon DouglasSkeet, T. H. H.
Johnson-Smith, Sir GeoffreySmith, Tim (Beaconsfield)
Jones, Gwilym (Cardiff N)Soames, Hon Nicholas
Speller, TonyTrippier, David
Spence, JohnTwinn, Dr Ian
Spencer, D.van Straubenzee, Sir W.
Spicer, Michael (Worcs, S)Waddington, David
Stanbrook, IvorWakeham, Rt Hon John
Stern, MichaelWalden, George
Stevens, Lewis (Nuneaton)Wall, Sir Patrick
Stevens, Martin (Fulham)Waller, Gary
Stewart, Andrew (Sherwood)Wardle, C. (Boxhill)
Stokes, JohnWatson, John
Sumberg, DavidWatts, John
Tapsell, PeterWells, Bowen (Hertford)
Taylor, Teddy (S'end E)Wheeler, John
Terlezki, StefanWhitfield, John
Thatcher, Rt Hon Mrs M.Wiggin, Jerry
Thomas, Rt Hon PeterWood, Timothy
Thompson, Donald (Calder V)Woodcock, Michael
Thompson, Patrick (N'ich, N)Yeo, Tim
Thorne, Neil (Ilford, S)Young, Sir George (Acton)
Thornton, Malcolm
Thurnham, PeterTellers for the Ayes:
Townend, John (Bridlington)Mr. David Hunt and
Tracey, RichardMr. Michael Neubert.
NOES
Abse, LeoHughes, Sean (Knowsley S)
Alton, DavidHughes, Simon (Southwark)
Archer, Rt Hon PeterJohn, Brynmor
Ashdown, PaddyKaufman, Rt Hon Gerald
Ashton, JoeKilroy-Silk, Robert
Atkinson, N. (Tottenham)Kinnock, Neil
Bagier, Gordon A.T.Lewis, Ron (Carlisle)
Barron, KevinLloyd, Anthony (Stretford)
Beckett, Mrs. MargaretLofthouse, Geoffrey
Beith, A. J.Loyden, Edward
Bennett, A. (Dent'n & Red'sh)McCartney, Hugh
Bermingham, GeraldMcDonald, Dr Oonagh
Bidwell, SydneyMcKelvey, William
Boothroyd, Miss BettyMaclennan, Robert
Bray, Dr JeremyMadden, Max
Brown, N. (N'c'tle-u-Tyne E)Marek, John
Bruce, MalcolmMason, Rt Hon Roy
Buchan, NormanMeadowcroft, Michael
Callaghan, Rt. Hon. J.Mikardo, Ian
Campbell-Savours, DaleMillan, Rt Hon Bruce
Clarke, Thomas (Monkl'nds)Mitchell, Austin (G't Grimsby)
Cocks, Rt Hon M. (Bristol S.)Morris, Rt Hon A. (W'shawe)
Cohen, HarryNellist, David
Cook, Frank (Stockton North)O'Neill, Martin
Cook, Robin (Livingston)Orme, Rt Hon Stanley
Corbett, RobinOwen, Rt Hon Dr David
Corbyn, JeremyPatchett, Terry
Cowans, HarryPenhaligon, David
Cunliffe, LawrencePike, Peter
Davies, Rt. Hon. Denzil (L'lli)Powell, Raymond (Ogmore)
Davies, Ronald (Caerphilly)Randall, Stuart
Deakins, EricRedmond, M.
Dixon, DonaldRees, Rt Hon M. (Leeds S)
Dobson, FrankRichardson, Jo
Dormand, JackRoberts, Ernest (Hackney N)
Douglas, DickRobinson, G. (Coventry NW)
Duffy, A. E. P.Rooker, J. W.
Dunwoody, Mrs. G.Ross, Stephen (Isle of Wight)
Fatchett, DerekRowlands, Ted
Faulds, AndrewSheldon, Rt Hon R.
Field, Frank (Birkenhead)Shore, Rt Hon Peter
Fisher, MarkSilkin, Rt Hon J.
Forrester, JohnSkinner, Dennis
Foster, DerekSmith, Rt Hon J. (M'kl'ds E)
Freud, ClementSoley, Clive
George, BruceSpearing, Nigel
Hamilton, W. W. (Fife Central)Stewart, Rt Hon D. (W Isles)
Harman, Ms HarrietStraw, Jack
Harrison, Rt Hon WalterThomas, Dafydd (Merioneth)
Hattersley, Rt Hon RoyThompson, J, (Wansbeck)
Haynes, FrankTinn, James
Heffer, Eric S.Wainwright, R.
Hoyle, DouglasWallace, James
Hughes, Mark (Durham)Wareing, Robert
Hughes, Robert (Aberdeen N)Welsh, Michael
Wigley, Dafydd
Wilson, GordonTellers for the Noes:
Winnick, DavidMr. Allen McKay and
Woodall, AlecMr. Mr. Norman Hogg.
Young, David (Bolton SE)

Question accordingly agreed to.

Resolved,That income tax for the year 1983–84 shall be charged—

  1. (a) in respect of so much of an individual's total income as exceeds £14,600 at such higher rates as are specified in the Table below; and
  2. (b) in respect of so much of the investment income included in an individual's total income as exceeds £7,100 at the additional rate of 15 per cent.

TABLE
Part of excess over £14,600Higher rate
The first £2,60040 per cent.
The next £4,60045 per cent.
The next £7,10050 per cent.
The next £7,10055 per cent.
The remainder60 per cent.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

I am now required under Standing Order No. 114(3) to put successively and without further debate the Question on each of the Ways and Means motions Nos. 2 to 9.

Does any hon. Member wish to divide the House on any of those motions?

Photo of Alan Beith Alan Beith Opposition Whip (Commons)

We wish to divide on Motion No. 3, Mr. Deputy Speaker.

Photo of Mr Harold Walker Mr Harold Walker , Doncaster Central

In that case, instead of reading out each motion in extenso, I propose to follow the procedure used in recent years. That is to say, I shall first state the title of the motion and then simply put the Question, That the motion be agreed to.